CNG price may rise by steep Rs 8 per kg from April

Close on the heels of the biggest-ever increase of Rs 4.50 per kg, the cost of CNG may go up by a steep Rs 8 per kg from April 1 when natural gas prices will almost double.

The government on Friday notified the pricing of all domestically produced natural gas at an average of global gas trading hub rates and the cost of imported LNG. Accordingly, the price of gas is expected to be in the range of $ 8.2 to 8.4 per million British thermal units (mBtu) in April as against the current $ 4.2.

Oil Ministry officials said a $ 1 per mBtu increase in the price of domestic gas would result in a hike of Rs 2.93 per kg of CNG in cities that are entirely dependent on domestic gas.

While Indraprastha Gas Ltd, the supplier of compressed natural gas (CNG) in New Delhi, procures 72 per cent of its needs from domestic fields, Mahanagar Gas Ltd in Mumbai buys almost all of its gas from domestic producers. CNG retailers in Gurgaon and Faridabad get almost all of their gas locally.

For cities such as Mumbai, the $ 4 per mBtu hike in natural gas price will translate into an increase of Rs 11.72 per kg, while in Delhi the rate may go up by Rs 8.2 per kg, they said.

Last month's Rs 4.50 per kg hike in CNG rates in Delhi to Rs 50.10 kg led to strong protests, with even new Delhi Chief Minister Arvind Kejriwal summoning officials of IGL and its parent firm GAIL India for an explanation.

The officials said a $ 1 per mBtu increase in gas price would result in a $ 24.893 per tonne hike in urea production cost. This additional production cost would be the increase in subsidy the government paid on urea.

On power, a $ 1 per mBtu increase in gas cost would result in the cost of electricity generation going up by 45 paisa per unit.

"The impact of increase of gas price and likely measures to minimise the burden on power sector is being carried out by the Ministry of Power," an official said.

Oil Minister M Veerappa Moily yesterday defended the gas price hike decision, saying out of the $ 1 billion in additional revenue that operators would get, $ 400-500 million would accrue to the government in the form of higher taxes and royalty.

Moily said the price increase was needed to incentivise production from new fields, which were not economically viable at the current rate of $ 4.2.

The higher revenue that the government gets can be used to subsidise power and fertilisers, he said, adding that the scheme for this was to be worked out by the power ministry.